Postponing Providence

The following is an excerpt from commentary that originally appeared
at Treasure Chests for
the benefit of subscribers on Tuesday, October 20th, 2009.

That's the game - postponing providence - putting off the inevitable until
the next guy's shift. This is the cache of our political economy, as with all
other comparables before it, now maturing into rot. All dominant cultures recede
this way of course, dying from within as it were. And the American Empire is
no different, with its hollowed out economy, markets, and values. Despite the
obvious signs of this decay, most people continue to deny and ignore the inevitable,
however acceleration of collapse will continue to challenge such fancy, eventually
becoming self-evident to even the less endowed.

This is how stock market crashes are set-up of
course, with the public plodding along merrily, postponing their true providence
with full might, until the boom drops and reality reappears. Furthermore, it's
important to understand it's not just our price fixing and overindulgent bureaucracy
that is to blame for this, as all those who do nothing to return us to a more
honest living are to blame as well, with increasing numbers continually looking
for handouts and hush-money. It appears we have reached our critical mass in
this regard however, as warned last year with the sudden and dramatic swoon
in the stock market, our omnipresent measure of wealth and financial well-being
having so many now dependent on continued strength.

In fact, it would be safe to say the US (and world due to its dependence on
American consumers) is totally dependent on its paper economy now, which is
why the bureaucracy endeavors to preserve it with such vigor, using all means
of trickery, deceit, and subterfuge to maintain the fantasy, having exported
the manufacturing (real) economy to cheap labor in China for decades now. The
storyline was American no longer needed these jobs because a better educated
work force would get higher paying jobs in other sectors. And for a while,
this worked like a charm, with increasing wages matched against lower cost
goods coming out of Asia fuelling the greatest boom mankind has ever known.

As with all boom - bust economies however, the aftermath of such folly can
be quite profound, with the primary determinant here being just how much alcohol
was consumed on the binge. In this case, that being our now heavily integrated fiat
currency based global economic experiment, the prognosis is not good, with
volatility in the various associated markets (stock, bond, commodity, currency)
equivalent to convulsions of a dying patient. You see our bankers, who need
continued economic growth somewhere in order to keep fiat money expanding,
have run out of markets to exploit in this regard. What's more, in exploiting
the largest population bases (China / India) now, with the lion's share of
growth already spent, the only way to keep the numbers growing faster on aggregate
is to inflate prices.

And this is where we are right now, with China attempting to carry the entire
globe via accelerating
money supply growth. This of course creates problems with rising
prices and over
consumption, which will exact a price in the bust, where we are going next.
After an initial liquidity related sell-off, this will keep commodity prices
firmer through a contraction than would have otherwise been the case. What's
worse, this condition could be exacerbated by some degree of accelerated
inflation again (in response to the next round of economic troubles), with hyperinflation not
out of the question. The good news is physical
gold market constraints should finally be enough to blow up the gold cartel,
unleashing the metal of kings as a true barometer of the economy's financial
health - that being terminal. At least more people would finally know.

Prior to this however, and based on a return to 'business as usual' for our
bureaucracy and business elite, more aggressively exploiting a placated public
all the time, the unraveling will come again, first in the stock market (this
time around) by surprise. (We are likely at this point now.) This is because credit
spreads are so heavily managed, like gold, and are now incapable of sending
out the appropriate warning signs ahead of time. They will likely react in
the correct fashion once it's evident the markets are in trouble again and
work to constrict credit, however don't expect to get a warning shot across
the bow here with the Feds massaging these measures in an attempt to keep the
economy's boat afloat. Again, this is what crashes are all about, however we
are not predicting one here, just preparing for round two of the larger degree
cycle related second wave of the 'credit
crunch', due to be self-evident again by next summer.

Moving into the charts now, after the above warning to 'get safe' with your
investments, it appears bank
stocks have decided to stop rising despite continued strength in the broads,
which should be considered a potential warning shot across the bow. Highlighting
this risk, and a subject that will be discussed in further detail in Thursday's
report, is the fact US index open interest put / call ratios collapsed as of
reporting last Friday, at options expiry. Now, this does not mean the bears
can't return, which is why we will give it a few days before speaking further
on the subject, however the possibility of the bears finally being exhausted
going into the period of seasonal strength that starts about now has been heightened
because of this, bring my seasonal
inversion hypothesis into prominence. What's more, and in continuing to
focus on indicators that still work, my work tells me the Gold / Silver Ratio
has the potential to make an important bottom any day now as well. (See Figure
1)

Figure 1

So, in the absence of 'working credit spreads' to warn us of impending / reaccelerating
financial peril, we have our core battery of ratios telling us that in spite
of this, extreme caution is warranted at this time. Going past this, I am taking
things one step further for aggressive traders within our ranks and issuing
a 'sell advisory', with corresponding short selling suggestions via the ETF's
now updated in our Short
Portfolio, which can be found under the Portfolios button
off the main page. Moreover, it should be noted we have officially gone 'bearish'
across all time frames now including 'short term', which is also updated. In
the larger picture, you should also know the other portfolios will be reactivated
at the appropriate time, that being when sustainable growth metrics return
to respective sectors, which will not be anytime soon. This is because the
dollar ($) could rally well into next year in round two of the credit crunch,
as indicated below. (See Figure 2)

Figure 2

Unfortunately we cannot carry on past this point, as the remainder of this
analysis is reserved for our subscribers. Of course if the above is the kind
of analysis you are looking for this is easily remedied by visiting our continually
improved web site to
discover more about how our service can help you in not only this regard, but
also in achieving your financial goals. For your information, our newly reconstructed
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stay on top of things. Here, in addition to improving our advisory service,
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well presented 'key' information concerning the markets we cover.

And if you have any questions, comments, or criticisms regarding the above,
please feel free to drop
us a line. We very much enjoy hearing from you on these matters.

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